The Sendai Co, Lld, of Japan has budgeted costs in its various departments as fo

Question

The Sendai Co, Lld, of Japan has budgeted costs in its various departments as follows for the coming year 631,400 183,820 46,638 136,942 1,330,440 526,260 Factory Administration Custodial Services Maintenance Total cost $2,855,500 The company allocates service department costs to other departments in the order listed below. Square Feet ofDirect Total Number of Labour- Space Labour Machine- Employees Hours Occupied Hours Hours Depart Factory Administration Custodial Services Personnel 5,300 3,90011,700 13,800 49,30013,400 90,000 105,000 66,000 195,000 18 6,600 51 120 310 Assembly 120,000 35,000 185,000 39,000 287,000 177,000 251,000 234,000 Machining and Assembly are operating departments; the other departments are service departments. Factory Administration is allocated on the basis of labour-hours; Custodial Services on the basis of square feet occupied, Personnel on the basis of number of employees; and Maintenance on the basis of machine- hours

Explanation / Answer

1.. STEP-DOWN Method: Factory administration Custodial services Personnel Maintenance Machining Assembly Operating dept. costs 1330440 526260 Costs to be allocated 631400 183820 46638 136942 Allocation Factory administration(13900;13800;49300;90000 & 120000 /287000) -631400 30580 30360 108460 198000 264000 Total after allocation 0 214400 76998 245402 1528440 790260 Maintenance (195000 & 39000 /234000) -245402 204502 40900 Total after allocation 0 214400 76998 0 1732942 831160 Custodial services(6600,105000 & 35000/146600) -214400 9652 153561 51187 Total after allocation 0 0 86650 0 1886502 882347 Personnel(80 &120 /200) -86650 34660 51990 Total after allocation 0 0 0 0 1921162 934337 Predetermined OH Rate 1921162/195000= 9.85 934337/185000= 5.05 2.. DIRECT Method Factory administration Custodial services Personnel Maintenance Machining Assembly Operating dept. costs 1330440 526260 Costs to be allocated 631400 183820 46638 136942 Allocation Factory administration(90000 & 120000 /210000) -631400 270600 360800 Custodial services(105000 & 35000/140000) -183820 137865 45955 Personnel(80 &120 /200) -46638 18655 27983 Maintenance (195000 & 39000 /234000) -136942 114118 22824 Total Ohs after direct allocation 0 0 0 0 1871679 983821 Predetermined OH Rate 1871679/195000= 9.60 983821/185000= 5.32 3… Plant-wide OH rate= Total OH costs/Direct labor hrs. 2855500/287000= 9.95 4.. OH Cost Step-down method (220*9.85)+(12*5.05)= 2227.6 Direct method (220*9.6)+(12*5.32)= 2175.84 Plant-wide method (113*9.95)= 1124.35

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